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Sunday, July 16, 2017

Benjamin Lascia — The American Enterprise Institute releases a proposal for a universal basic income

The paper’s proposal is a budget-neutral form of a UBI, meaning instead of implementing a basic income in addition to the existing American social welfare system; most existing programs like Medicaid, Veteran’s Benefits, and Social Security for the elderly over 65 are repealed and replaced with a UBI. Using data from the Federal government’s budget outlays from 2014, the paper finds that the repeal of large programs in America would yield about $2.54 trillion dollars. In addition to this, the proposal repeals 23 different tax benefits like the Student Loan interest deduction and Earned Income Tax credit, bringing in more revenue and freeing up a grand total of about $3.21 trillion for a UBI.

With additional taxes coming in from the UBI itself, and increased tax liabilities on all income tax brackets, the proposal finances and prescribes a basic income of $13,788 for individuals over the age of 18 and $6,894, or half the income of adults, for individuals under the age of 18.

Using Federal government tax data, the paper analysis the net benefit gain or loss by tax bracket and age. Using the parameters described, the findings show that some of the most adversely affected by this system are in the lowest tax bracket ($0-$10,000). This is unsurprising, because many of the programs this proposal had repealed to finance the basic income are concentrated on this tax bracket.

Another group adversely affected by this proposal are individuals 65 and older, also because their benefits, such as Social Security, have been repealed and distributed among the rest of the population. When excluding age groups of 65 and older, however, nearly all tax brackets see a net benefit in this proposal, with the brackets seeing the greatest benefits being those in the middle.…

The important findings in this proposal from the American Enterprise Institute show that, if a UBI were to merely replace the existing social welfare system in the United States, by repealing existing welfare programs and tax benefits, there would be an overall redistributive impact from the old to the young, and from the poor to the middle class; though there would be a gain in efficiency overall.

As always, I prefer a means tested BIG to a UBI, and I have long suggested that health care and child support should be provided separately from the basic income.

Note that the UBI is not being pushed by poor people, who, dating back to Martin Luther King and A. Philip Randolph, advocated a JIG, not a UBI. Rather the UBI is being pushed by affluent libertarians on the right and by urban professional "progressives" on the left.

The urban professionals want a UBI -- which they imagine would pay $40,000, not $13,788 -- so they can quit their jobs and write poetry.

Lately the UBI has dominated the debate while the mean-tested BIG has been ignored. I believe that a UBI could be made to work, but it would be far more complicated than making a means-tested BIG work. There is more than one way to handle a basic income and the devil is in the details.

If we are really concerned about helping the poor -- as opposed to writing poetry or reducing the size of government -- then any basic income proposal should be focused on how to help the maximum number of poor people for the least cost and least rules and regulations.